Businesses are not investing in their workers

Friday, May 16, 2014 3:42 PM

Profits are up and productivity is down in post-recession America. Part of the reason is that businesses aren't investing in their workers, Bloomberg Businessweek reported.

Growth of capital spending during this recovery is about 30 percent below the average of the five most recent recoveries, according to Bank of America Merrill Lynch. That's left many workers without the capital -- equipment, software, and structures -- that they need to be more productive. Whether it's a computer or a forklift, workers are stuck using outdated machines.

The average age of equipment in the U.S. is 7.4 years, the highest in 20 years, according to the Bureau of Economic Analysis.

After growing 0.5 percent in 2010, the amount of capital per hour worked fell 1.1 percent in 2011 and 0.8 percent in 2012. According to the Bureau of Labor Statistics, that's the first time capital per worker has declined since the agency began tracking the measure in 1987.

Considering that business investment remained weak in 2013 and early 2014, "we are likely in an unprecedented fifth year of no growth in capital per worker," Ted Wieseman, an economist at Morgan Stanley, wrote in a May 7 note to clients.